Financial tightening: No pain,
no gain
Soaring inflation gave central banks little choice but to hit the economy with the largest rate hikes in over 40 years throughout 2022. We do not foresee a large default wave in 2023, as the refinancing calendar for the high-yield bond market will not be significant until 2025. We believe that if central banks are forced to maintain policy rates at these levels to rein in inflation, tighter financial conditions will be a headwind for business fundamentals in 2023.